How the Rise of Developing Countries Has Disrupted Global Trade
For most of his time in office, President Donald Trump has waged a global battle to rebalance trade in the U.S.’s favor. An escalating trade dispute with China has already led to tariffs on hundreds of billions of dollars in goods and months of high-level negotiations, including talks scheduled this week that were called into question after Trump threatened to further raise tariffs. But these efforts aren’t likely to halt the shift in global trade toward the developing world. And China is far from the only nation challenging the status quo.
Twenty years ago, 62 percent of all bilateral trade was between just rich countries—namely the U.S., Canada and Europe—according to a Bloomberg analysis of UN Comtrade data where both trading partners are known. Now that share is down to 47 percent as developing countries become more prominent trading partners. The value of trade between emerging economies is up 10-fold during that period.
Trading With Rich and Poor Alike
While trade with Latin American and African countries has grown rapidly, the real emerging-market counterweight has come from the East: namely China, India and Southeast Asia. This continues a similar trend identified in a 2012 McKinsey Global Institute report, which mapped the world’s economic center of gravity as it moved from northern India 1,000 years ago to the North Atlantic in the 1900s to central Russia now, en route to China.
Fifty-three percent of bilateral trade now involves at least one emerging market, up from 38 percent in 1997. Though trade between two developing countries remains a relatively small share of the total—14 percent in 2017—it’s on pace to make up a majority of global commerce before the end of the century.
The number of countries where the majority of trade is with emerging markets is also up sharply, to 64 from 19 two decades ago.
Relative Share of Bilateral Trade
- Both emerging markets
- One emerging market
- No emerging markets
Emerging-Market Trade Focus
- Countries with majority emerging-market trade
- Total number of countries
This shift has led key producing regions of the developing world to loosen their reliance on demand from wealthier markets. This means more food, energy, building materials and consumer goods are now flowing to some of the poorest areas of the world, delivering a much-needed boost to local living standards.
These are some of the products behind this historic trade reshuffle. In almost every case, the U.S. and Japan saw the deepest declines in imports from developing markets.
Asia Craves Latin American Coffee and Beef
Seventy-eight percent of agricultural exports from Brazil and Argentina go to other emerging markets, up from half in 1997.
China, Vietnam and India saw the biggest increases. China now buys nearly 29 percent of all agricultural exports from Latin America’s bread basket countries, up from 6 percent. In the Netherlands, its share of those exports fell from 17 percent in 1997 to just 4 percent.
Agricultural Goods
South Africa’s Miners Look East for Exports
More than 55 percent of metals and precious gems exported by the country go to other emerging markets, up from 22 percent in 2007.
China and India saw the biggest increases, followed by neighboring Botswana and Mozambique. Collectively, these four countries account for nearly 40 percent of South Africa’s mineral exports. That’s more than the share the U.S. and Japan were responsible for 10 years ago, when they were the biggest buyers; now, their combined share has fallen by more than half. The U.K. and Germany’s shares fell to 5 percent and 4 percent, respectively.
Minerals and Precious Metals
OPEC Finds a Thirsty Buyer in India
More than 45 percent of crude exported by current Organization of Petroleum Exporting Countries (OPEC) members now goes to other emerging markets, up from 11 percent in 1997.
India’s breakneck economic growth has meant an insatiable appetite for energy—and therefore a growing need for what OPEC members have: oil. Over the last 20 years, its share of OPEC crude exports has grown more than 15-fold, putting it behind only the U.S. as the bloc’s largest customer. But that may soon change. The U.S.’s 15-percent share is down dramatically from around 46 percent in 1997, thanks in part to the country’s shale oil boom.
Crude Oil
China’s Neighbors Spend Big on Electronics
Twenty-eight percent of China’s top export goes to other emerging markets, up from 11 percent in 1997.
Twenty years ago, India and Vietnam were each importing less than $100 million worth of Chinese electronics and electrical equipment. By 2017, that was around $20 billion each. Neighboring South Korea saw significant growth, becoming the second-biggest foreign destination for Chinese exporters, surpassing Japan, whose share fell by more than any other country.